With Deva's Judgement, The Modi Government Cleans Yet Another UPA Mess
The Narendra Modi administration breathed a sigh of satisfaction on Monday as the Supreme Court dismissed Devas Multimedia's petition against the National Firm Law Appellate Tribunal's (NCLAT) ruling upholding the NCLT's order to wound up the corporation.
The Union of India lawsuit challenging the arbitration ruling for Devas, which is currently being considered by a Dutch court, might have deteriorated if the Modi administration had not taken prompt actions by ensuring that ISRO's Antrix, commercial arm, approached the NCLT for dissolution of Devas on fraud claims. The Devas-Antrix agreement was signed in 2005 and terminated in 2011 by the Manmohan Singh administration amid allegations of corruption, although without activating the national security provision.
While the Supreme Court's decision has reinforced India's lawsuit worldwide, it is clear that the Narendra Modi administration has spent a significant amount of time cleaning up the chaos left by the former UPA administration - be it oil bonds, retrospective tax, oil bonds, ballooning fiscal deficit or defaulting on CST payments to states.
Bonds backed by oil
Oil marketing corporations had enormous under-recoveries throughout the UPA administration because retail fuel costs did not maintain up with international crude oil prices. Rather than rewarding the oil corporations with gasoline subsidies, the administration transformed under-recoveries into deferred payments and long-term oil bonds. The Modi administration is also paying a high price for the UPA's incompetence, with annual interest payments of around ten billion rupees on oil bonds totalling 1.3 lakh crores released by the previous administration.
The NPA is in trouble.
Bad loans or Non-performing assets (NPAs), which have wreaked havoc on the banking industry, are yet another remnant of the UPA period that the current NDA administration must deal with. Thousands of crores were given to politically linked fat cats by public sector financial institutions throughout the former administration, frequently without due diligence. In some circumstances, defaulters were able to obtain fresh loans to repay their previous debts.
States' commitments are being broken.
The move to a value-added tax, or VAT, resulted in a progressive decrease in the central sales tax, which was dispersed among the states. Although repeated guarantees to states about compensation for missed CST collections, the UPA administration failed to keep its word. The Modi administration granted a CST compensation of Rs. 33000 crore in 2015, rebuilding trust in the Centre-State relationship and clearing the path for the GST implementation. The truth is that the previous administration did not appropriately transfer the tax burden to states. According to the CAG, the Centre devolved less than the due share of taxes to the states for numerous years between 2004 and 2014 as a result of mistrust between the state and centre governments.
Fiscal deficits are high.
A further landmine left behind was the large budget deficit. During UPA II, the average fiscal deficit was between two and 5.5 per cent of GDP. To minimise rising inflation and significant bank debt, an urgent course correction was required. Since 2014, the Modi administration has maintained budgetary discipline without sacrificing welfare schemes for the poor or adding to the load on the middle sector.